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"Phishing" and Other Online Identity Theft Scams: Don't Take the Bait

Update: According to computer security experts, economic cyber-crime continues to surge. "Phishing" attacks—scams that use spam email or a fake website to lure you into revealing your bank or brokerage account information, passwords or PINs, Social Security number or other types of confidential information—have increased significantly since they were first discovered in 2005. FINRA is updating this Alert to keep you informed about some of the latest online identify theft scams targeting financial sector customers and to provide tips for spotting and avoiding these scams.

Fraudsters can turn on a dime when it comes to creating new pitches to separate hard-working Americans from their money. Virtually any news item, positive or negative, can become a "hook" for a new scam—whether a natural disaster (domestic or international) or the launch of a new product or company.

But sometimes the hook can look more mundane—and can come in the form of a seemingly authentic email from a well-known company, financial institution, or even a government agency or other regulator, you know and trust. For instance, around tax time, the Internal Revenue Service (IRS) regularly warns of phishing schemes that use references to tax refunds, filing issues or investigations to lure recipients into opening a bogus email.

Real Life Examples: Fake IRS and SEC Emails

A recent scam involved an email that appeared to be from the IRS Taxpayer Advocate Service. The email included a bogus case number and links to the supposed “advocate,” which actually led to a Web page that phishes for personal information.

The Securities and Exchange Commission (SEC) warned investors to beware of emails that appear to come from SEC staff, including a bogus email scam using the name of the SEC’s Director of the Office of Investor Education and Advocacy. The email was in fact not from the SEC, and contained a link to malicious software.

"Phishing"—Fraudulent Emails That Steal Your Personal Information

Phishing scams typically involve emails that falsely claim to be from brokerage firms, banks, credit card companies, Internet auction sites, electronic payment services or some other service that you use. In other instances, the emails purport to be from government agencies. To appear genuine, these emails may use:

Most of these emails attempt to lure you into providing sensitive personal information by requesting that you provide it in a reply email or by clicking on a link to a website that mimics a legitimate website and asks you to provide the information. Various "urgent" messages are also used to lower your guard, such as:

Your account will be shut down unless you update your information.

You need to verify your identity because your account appears to be being used by a third-party in violation of the law.

Financial Phishing

Fraudsters regularly target customers of financial services firms with deceptive email tactics. According to a recent industry study, 71 percent of phishing scams detected in 2014 spoofed banks1. Some fraudulent emails, for example, appear to originate from a financial institution that acquired the consumer's bank, savings and loan or mortgage. They direct recipients to update, validate or confirm account information by clicking on a link that redirects to a "spoofed" website that looks similar to, but is actually a fraudulent copy of, the website of a legitimate financial institution or lender. Also be wary of emails from financial institutions that purport to have updated their online security systems.

Real Life Example: Fake Emails to Bank Customers

According to the Better Business Bureau, the following phishing email circulated around the Internet in early 2014. Customers who clicked through to the website and entered banking information exposed their information to the scammers.

Trojan Horses—Hidden Software That Tracks Your Every Move Online

Trojan Horses are malicious software programs (often called “malware” or "crimeware") that hide in files attached to an email or that you download from the Internet and install on your computer. While these programs can take many forms, Trojan Horses used in identity theft scams usually take the form of keystroke loggers—programs that log the keystrokes you type and allow scamsters to find your usernames and passwords, giving them access to your online accounts. Over the years, Trojan Horses have increasingly been showing up in "phishing" scams, or used in place of a phishing scam to secretly capture sensitive information.

Real Life Example: Crimeware

A crime group sent false email messages purporting to be from popular social networking sites that contained fictitious offers for popular software upgrades and fake tax forms. These "lures" took victims to sites where the criminals infected their computers with “crimeware,” allowing the criminals to access the computers remotely to steal personal information, intercept passwords and online transaction information, and even log onto the victim’s computer to perform online banking transactions.

Brokerage Firm Identify Theft Scams—Using a Good Name for Crime

Some scamsters are creating phony websites that misappropriate the name or website content of legitimate brokerage firms to solicit business from unwary investors. By stealing the identity of a legitimate brokerage firm, scamsters can claim that they are members of the Securities Investor Protection Corporation (SIPC) and registered with FINRA. Potential investors may be urged to go to SIPC's and FINRA's websites to "verify" the phony brokerage firm, giving them a false sense of security.

Using these phony websites, the unlicensed brokerage firms often attempt to sell shares of small U.S. companies to investors in other countries. After the sale, the price usually falls and the investors lose their money. In a twist on this scam, the fraudsters may offer to help investors recover their losses by selling their thinly traded stocks (usually, bought through another scam). However, in order for the transaction to proceed, the investor must first deposit money in an "escrow account" or buy a performance bond. The phony firm then vanishes with the money.

Phishing Today

Phishing scammers are growing ever more sophisticated:

Targeted phishing—known as "spear phishing"—is a recent twist. Scammers send messages that appear to be from an individual or business that you know. These “friend” or “colleague” emails seem plausible (for instance, an email that looks like it is from your company’s HR department asking for updated personal information). The latest wave in spear phishing: mobile apps that appear to be recommended by someone you know.

It used to be that misspelled company names and jumbled Web URLs were a clear tip off to early phishing ploys. But now seemingly legitimate links can hijack users to a fraudulent site through technical code buried behind the message.

Scammers have learned to modify a directory called a host file in Microsoft Windows that can turn your browser into a vehicle for a phishing excursion: type in a Web address from your browser and you could be directed to a fraudulent site.

Domain-name servers match up users or customers with the computers they use to access the Internet. If the server is corrupted, it’s possible that identity thieves could be routing users to a look-alike site.

Seven Tips to Protect Yourself from Online Identity Theft

Beware of email requesting personal information. Don't reply to or click on a link in an unsolicited email that asks for your credit card, bank or brokerage account information, passwords or PINs, Social Security number or other types of confidential information, even if it looks like the email comes from a financial institution with which you do business. When in doubt, log onto the main website of your credit card, bank or brokerage firm at the normal Web address you use, or call your firm using a telephone number that you know or one from a previous account statement to inquire about whether the request for information is legitimate. Alternatively, you can obtain the main office address and primary telephone number for any brokerage firm through FINRA BrokerCheck. You also can visit the Anti-Phishing Working Group's website to find out about some of the latest phishing attacks.

Leave suspicious websites. If you think a website is not legitimate, leave it immediately. Legitimate firms typically offer customers a number of ways to contact them.

Keep your personal and financial information secure online. Here are a few simple steps that you can take to make your information more secure when you go online:

Keep your computer system up to date with the latest security patches.

Use anti-virus and spyware detection software and be sure to update this software regularly, as new viruses and Trojan Horse programs appear frequently.

Use personal firewall software. Firewall software should thwart intruders from getting access to your PC over a network.

Consider installing a Web browser tool bar to help protect you from known fraudulent websites. These toolbars alert you to known phishing websites.

Never download software or files from an unknown source.

Change your passwords on a regular basis. Never send your password to anyone in an email. Try not to write down your password, but if you must, put it in a safe place.

Avoid emailing personal or financial information.

Read your firm's policies on online security. Review other tips and security instructions that may be offered to better protect your access.

Before submitting personal or financial information through a website, look for the locked padlock image——on your browser's status bar or look for "https://" [note the "s"] at the beginning of the Internet address. While a padlock image or "https://" does not mean that the website is authentic or secure—indeed both can be forged—the absence of either the padlock or the https:// does mean that the site is not secure.

Log off of any secure legitimate website after completing a transaction.

Be careful when using Internet kiosks or other people's computers. Since you don't know what security precautions have been taken, you may be putting your confidential information at risk.

Know who you are doing business with. Before you open an account with a brokerage firm, use FINRA BrokerCheck to make sure the brokerage firm and broker are properly registered and to verify phone and address information you receive from the firm or broker. Investments are a major financial undertaking and should be afforded the same degree of investigation and caution as any other major purchase you might make.

It is a good idea to check your credit report every year. To guard against identity theft, look for accounts you did not open and any unexplained transactions. You can obtain free copies of your credit report annually from each of the three major credit bureaus online at www.annualcreditreport.com or by calling (877) 322-8228. You may also contact the credit bureaus directly as follows:

Review your account statements. This is your last line of defense. If you are victimized, the sooner you catch it, the better. Regularly review your online account information for unauthorized trades, cash withdrawals or any other unrecognized activity; do the same as soon as you receive each monthly or quarterly statement. If you have moved, make sure to update your postal address with all of the firms where you have accounts. If you receive your statements by email and change your Internet service provider or otherwise change your preferred email address, make sure to update your email address with all of the firms where you have accounts. Immediately report any suspicious activity to your firm.

Act quickly if you believe you've been scammed. If you believe that you're a victim of one of these scams, you need to act quickly. For example, you may only have 60 days to report a loss or theft of funds through an electronic funds transfer to limit your liability.

Identity Theft. If you believe your identity has been stolen, the Federal Trade Commission's Identity Theft website contains step-by-step directions of what you should do.